REPLACING CONTINUOUS DEMAND WITH DISCRETE DEMAND IN A COMPETITIVE LOCATION MODEL

Location models commonly represent demand as discrete points rather th an as continuously spread over an area. This modeling technique introd uces inaccuracies to the objective function and consequently to the op timal location solution. In this article this inaccuracy is investigat ed by the study of a particular competitive facility location problem. First, the location problem is formulated over a continuous demand ar ea. The optimal location for a new facility that optimizes the objecti ve function is obtained. This optimal location solution is then compar ed with the optimal location obtained for a discrete set of demand poi nts. Second, a simple approximation approach to the continuous demand formulation is proposed. The location problem can be solved by using t he discrete demand algorithm while significantly reducing the inaccura cies. This way the simplicity of the discrete approach is combined wit h the approximated accuracy of the continuous-demand location solution . Extensive analysis and computations of the test problem are reported . It is recommended that this approximation approach be considered for implementation in other location models. (C) 1997 John Wiley & Sons, Inc.